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Greif Cuts 2012 EBITDA Outlook - Analyst Blog

Greif, Inc.
(
GEF
) has revised its fiscal 2012 (ending October 31, 2012) guidance
citing weaker volumes and a slower-than-anticipated recovery in the
European market during the third quarter. The company now estimates
EBITDA (earnings before interest, taxes, depreciation and
amortization) to be in the range of $445 million - $465 million,
down from the previous guidance of $500 million - $525 million.

The company had reported EBITDA (before special items) of $526.6
million in fiscal 2011. Including special items, EBITDA stood at
$467.2 million last year.

In the second quarter of fiscal 2012, Greif reported adjusted
earnings per share of 77 cents, down 26% from $1.04 in the year-ago
quarter. Revenues increased 4% to $1.09 billion in the
quarter.

In the Rigid Industrial Packaging & Services, net sales
increased 8% to $802.9 million for the second quarter 2012,
benefiting from a 12% increment from acquisitions that helped
offset a 5% decline in sales volumes owing to economic conditions
and market pressure, mainly in Europe. In the Flexible Products
& Services segment, sales declined 16% to $113.9 million due to
lower sales volumes, hurt by weak market conditions in Europe.

Ahead of its third quarter 2012 earnings release slated for August
29, 2012, Greif cautions that volume performance for the rigid
industrial packaging and flexible products businesses was
disappointing due to softer-than-anticipated market conditions.
Even though there have been some indications of the market firming
stabilizing in Europe, it is happening at a slower-than-anticipated
pace.

It seems that rigid packaging markets in other regions across
the globe are being impacted. The company notes that the geographic
mix of earnings will lead to a higher book tax rate for third
quarter 2012 compared to its previous expectation.

The economic conditions are also expected to have an impact on the
fourth quarter 2012 results, leading to reduction of the fiscal
2012 guidance. The company, however, remains optimistic that it
will continue to generate sufficient operating cash flow to support
quarterly cash dividends as well as other growth opportunities.

The Zacks Consensus Estimate for Greif is currently pegged at 86
cents for the third quarter, 96 cents for the fourth quarter and
$3.16 for fiscal 2012.

Delaware, Ohio-based Greif manufactures and sells industrial
packaging products, bulk containers, and containerboard and
corrugated products worldwide. The company provides services
such as blending, filling, packaging and recycling of industrial
containers for a wide range of industries.

Greif also manages timber properties in North America and
provides land management consulting services. Greif competes with
Longview Fibre Company, RockTenn CP, LLC and Temple-Inland Inc. The
stock retains a quantitative Zacks #5 Rank (short term Strong Sell
rating) over the near term.

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